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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
September 10, 2025

South Economic Performance

GDP, Economic Growth and Inflation for 2025Q2

South Africa’s economy experienced a commendable growth rate of 0.8% in the second quarter of 2025, exceeding the anticipated 0.5% expansion. This achievement occurred despite persistent international trade tensions, the cessation of U.S. aid, and impending trade tariffs on South African exports to the U.S., which commenced on August 7. Positively impacting growth were factors such as the interest rate cut in January, a stronger rand, stable confidence levels, and consistent electricity supply.

Of the ten economic sectors, Agriculture reported an impressive annual growth of 13.8%, with Finance growing by 2.2%, Trade by 2.5%, and Transport by 0.1%. Conversely, Electricity, Gas and Water shrank by 2.5%, Manufacturing by 1.2%, and Construction by 3.7%. Quarterly growth figures show Agriculture grew by 2.5%, building on an 18.6% rise in the prior quarter, primarily fueled by a bumper harvest and a 26% increase in exports to the U.S. for the quarter ending June 2025. Mining and Manufacturing increased quarterly by 3.7% and 1.8%, respectively, while Trade and the Finance sector expanded by 1.7% and 0.3%.

Looking ahead, the growth forecast for 2025 remains below 1.0%, largely due to the anticipated increased impact of U.S. trade tariffs from the third quarter. Despite the 0.8% growth in the second quarter, it did not alleviate South Africa’s unemployment issues, as the unemployment rate rose from 32.9% in the first quarter to 33.2% in the second quarter. Job losses are mounting in the third quarter, as U.S. trade tariffs directly affect businesses exporting to the U.S. market. The South African government is actively seeking new international markets for goods affected by U.S. tariffs and is working to address these trade barriers and diplomatic tensions with the U.S.

Addressing ongoing economic and structural challenges will require clear policy direction and progress on structural reforms. Enhancing diplomatic relations with the U.S. and ensuring the continuation of the AGOA agreement are vital. A stable rand, combined with low inflation and resolved U.S. trade and diplomatic issues, could potentially drive economic growth beyond current predictions.

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More Coverage

The Fuel Shock Dilemma: Why the SARB’s Inflation Medicine May Hurt a Fragile Economy

For South African businesses and households already managing a tight financial squeeze, the South African Reserve Bank’s (SARB) recent decision to hike the repo rate to 7.0% felt less like economic medicine and more like a handbrake. While central banks traditionally raise interest rates to cool down an overheating economy, South Africa’s current reality is vastly different. Our recent inflation spike isn’t driven by a wild shopping spree, but by global supply shocks and an imported energy crisis. This begs the crucial question: is the SARB using the wrong tool for the job, and at what cost to our fragile economic growth?

The Core Dilemma: Demand vs. Supply and Interest Rates

The case for holding interest rates is strong, as South Africa’s current inflation is being driven by global supply-side pressures like fuel prices, not excessive local spending. Raising rates now would place additional strain on already struggling consumers and businesses without addressing the real cause of inflation. With the Rand strengthening, oil prices stabilising, and diesel costs expected to decline, natural inflation relief is already emerging. Since inflation remains within the SARB’s target range, increasing borrowing costs could unnecessarily slow economic growth and job creation.

A view on Demand in the Economy: Retail Sales performance – March 2026 Data

Amid a turbulent economic backdrop, South Africa’s retail sales surged by an unexpected 2.6% in March 2026, outpacing forecasts and signalling a fragile yet persistent recovery in the consumer market. While interest rate cuts have bolstered household spending, challenges such as rising inflation, potential interest rate hikes, and geopolitical tensions loom large. Despite these hurdles, sectors like “other retailers” and general dealers have notably contributed to this growth spurt, raising questions about the sustainability of this recovery. With business and consumer confidence indices displaying mixed signals, the future of South Africa’s retail strength hinges on international relations, fuel costs, and policy decisions. Explore the dynamics and implications of these developments in our detailed report.

Consumer Inflation Rate – 2026

In an insightful analysis of South Africa’s economic landscape in April 2026, the report delves into the notable 4.0% year-on-year increase in the Consumer Price Index, accentuated by surging costs in housing, utilities, transport, and financial services. Amid rising inflationary pressures fuelled by global uncertainties, including the Middle East conflict and climbing oil prices, the South African Reserve Bank faces critical decisions on interest rates to balance inflation and economic growth. As households grapple with diminished purchasing power, the precarity of reliance on short-term credit looms large, while international factors such as US-imposed tariffs and potential BRICS trade tensions threaten market stability. The report provides a comprehensive look at the delicate dance South Africa must perform to maintain price stability and safeguard the Rand amidst a challenging global backdrop.

The SARB’s High-Stakes Tightrope: Balancing an Inflation Breach Against a Jobless Crisis

Next week’s SARB decision could define South Africa’s economic trajectory: facing an external oil shock and runaway electricity tariffs that threaten to push April inflation past the central bank’s 4.0% ceiling, policymakers must weigh a technical inflation breach against a staggering surge in unemployment and collapsing investment, a choice between credibility and survival. With joblessness spiking and GDP growth stagnant, aggressive rate hikes would risk choking off the private investment the country urgently needs, while inaction could dent the new inflation-targeting framework. Read the full report for a detailed breakdown of the shocks driving this dilemma, the likely “hold” outcome from the May 28 MPC meeting, and what it means for businesses, households, and markets.